Thursday, November 21, 2013

This blog brings up many economic and political issues that are easy to construe as evil. And, figuring out what we can do in the face of seemingly insurmountable oppression and power that negatively affects our lives is why many of us continue to wrestle with understanding what is going on in the government and economy.

What if the answer to these problems was already answered hundreds of years ago? How could anyone know what we would be dealing with now? The Chinese civilization is possibly the oldest surviving civilization on earth. They have been dealing with the issues of oppression by a ruling elite for a long time. So, while the specifics may be different now, the issue is the same.

The
genius of historical China rests in the oscillation between Confucian and
Taoism, between yang and yin. Confucianism is concerned with politics, ritual,
education, hierarchy -- all yang elements. Taoism is concerned with art,
poetry, nature, seasons -- all yin elements. Within ancient China, these
elements function like forces of energy, sometimes predominating, sometimes
not. To find unique conceptions and insights is to identify ideas within both
schools of thought. One such idea and practice is reclusion. Reclusion is the
conscious disengagement from relations with authority figures and structures.
In ancient China, reclusion was considered an expression of deep philosophy
based on an ethical premise as much as a practical action based on empirical observation
about survival and well-being. An ancient Chinese saying ascribed to Confucius
is aptly summarized: “When the emperor is good, serve; when the emperor is
evil, recluse.

The article talks about the dilemma people face on how to respond and what evolved in China hundreds and even a thousand plus years ago. The question is are these responses valid today? The Confucians believed that in certain circumstances it was acceptable to serve the government.

Two premises of the saying are clear. First, the saying assumes the inevitability of emperorship, and second, takes into account the vagaries of personality as the cause of stability or chaos. So-called good times legitimize not so much the emperor as the structure of empire. The saying promotes service in the state bureaucracy by the literate and intelligent of the day, often called scholars, usually scions of noble and mercantile families. Because the ancient Chinese state controlled all major enterprises, no other employment was deemed worthy of the educated man.
On the other hand, if the emperor was tyrannical and authoritarian, as in the violence-ridden Warring States era (471-221 BCE), resignation from government service and avoidance of summons to service was considered ethical and necessary, regardless of hardship. But Confucian theory could not reconcile imperial wars and military conscription in its advice, however, because scholars were easily exempted.

The Taoists, on the other hand believed it was never ethical to engage with authority. Sounds like some people I know today. Ha ha!

Taoists of the Former Han period (post-200s BCE) went further than Confucians. Taoists of this era maintained that the emperor and the empire were intrinsically evil. No service could be ethically justified, regardless of the personality of the emperor. To Taoists, Confucian recluses were mere retirees, not true recluses. The real issue was only the form of life that reclusion should take. The recluse must craft a life promoting the pursuits of virtue, which did not intersect with the goals of empire.

When thinking this through about my own personal response, I realized that my disengagement from emotionally involving myself in the political divisions is in a way a Taoist approach. The Taoists had three different ways of disengaging.

1)Reclusion in the city, or, becoming a “hermit of the marketplace,” a hermit in the crowd.” This life-style aimed at inconspicuousness, a low profile in the heart of the busy imperial capital or other cities, and in the midst of the thriving neighborhoods.

2)Reclusion to a farm or village affirmed the Taoist principles of simplicity and naturalness while providing greater anonymity than in a city and a more favorable setting for reflection and solitude. The recluse venturing to the land often worked side by side with simple folk of modest interests. Thus the intellectual Song Sheng-zhai quit the city to become a shepherd, take up the zither, become adept at calligraphy, and live in obscurity while practicing his virtue.

3)Reclusion to obscure natural places by those called by tradition “scholars of mountains and forests” and “men of cliffs and caves.” These were the classic hermits of ancient China who disengaged not only from the empire but from society itself, including to some degree rural society, living in virtual isolation.

I opted for #2 not knowing consciously at the time what some other part of me needed. The decision has turned out to be a good one for many reasons.

Monday, November 18, 2013

A stupid analogy because I cannot think of a better one right now is that when you first heat butter it is milky looking and then starts to bubble and until the bubbling stops you cannot see the bottom of the pan. This morning I saw the bottom of a couple pans.

The first one was thanks to a post over on Naked Capitalism where Yves Smith writes about one of the Right's favorite boobs and the left's Economic policy leader, Paul Krugman. The really interesting part of this post was the distinction between fiscal and monetary policy. Basically, Krugman and Summers argue in a NY Times article, for a couple things: First that since it is impossible to balance government spending we must inflate our way out of the budgetary mess we are in, and; Second, since there is no Real economic growth at this time, it makes sense to create economic bubbles. You should read the NY Times article Secular Stagnation, Coalmines, Bubbles, and Larry Summers so you know I did not make this up.

Back to fiscal vs monetary policy, once I understood how fiscal policy like running government deficits is the real culprit because it is trying to create economic growth through debt creation, which seems to be the only tool in the bag of policy-makers, then the current economic conditions around the world make more sense. Every government in the world seems to be creating debt though deficit spending (fiscal policy) and debasing their currency through central bank low interest rates (monetary policy). Makes me want to see if there is one western-style government not embarking on that path. Even the Swiss are debasing their currency now! The result of generating inflation is that individuals are the ones paying for this in reduced purchasing power. From Yves Smith.....

If you want to put it in
more technical terms, what is happening is a large and sustained fall in what
Keynes called the marginal efficiency of capital. Companies are not reinvesting
at a sufficient rate to sustain growth, let alone reduce unemployment. Rob
Parenteau and I discussed the drivers of this phenomenon in a New York Times
op-ed on the corporate savings glut last year: that managers and investors have
short term incentives, and financial reform has done nothing to reverse them.
Add to that that in a balance sheet recession, the private sector (both
households and businesses) want to reduce debt, which is tantamount to saving.
Lowering interest rates is not going to change that behavior. And if you try to
generate inflation in this scenario, when individuals and companies are feeling
stresses, all you do is reduce their real spending (and savings power) and
further reduce demand (and hence economic activity).

Steve Blumenthal came to the same conclusion in his weekly update. This sounds like the totally discredited trickle-down economic theory in different clothes. If you cannot do it politically with even lower taxes on the rich, then do it a different way with monetary policy.

“As shown in the charts below, the marginal effects of wealth
increases on economic activity have been declining significantly. The
Fed’s dilemma is that its policy is creating a financial market bubble
that is large relative to the pickup in the economy that it is
producing. If it were targeting asset prices, it would tighten monetary
policy to curtail the emerging bubble, whereas if it were targeting
economic conditions, it would have a slight easing bias. In other words,
1) the Fed is faced with a difficult choice, and 2) it is losing its
effectiveness.

The basic issue is that quantitative easing is a much less effective
tool when asset prices are high and thus have low expected returns than
it is for managing financial crises. That’s because QE stimulates the
economy by (1) offsetting a panic by providing cash to the financial
system when there’s a need for cash, and (2) by raising asset prices,
and driving money from the assets they buy into demand and investment,
creating a higher level of future economic activity. So, the policy was
particularly wise and most effective (in the sense of impact per
dollar) at the height of the financial crisis when there was both a
desperate need for cash and when extremely depressed asset prices were
heavily weighing on demand and investment.

And, John Maudlin in a promotional article of his new book writes about this in a similar vein. John writes:

This concept is key to understanding current economic thinking. The
belief is that it is demand that is the issue and that lower rates will
stimulate increased demand (consumption), presumably by making loans
cheaper for businesses and consumers. More leverage is needed! But
current policy apparently fails to grasp that the problem is not the
lack of consumption: it is the lack of income. Income is produced by
productivity. When leverage increases productivity, that is good; but
when it is used simply to purchase goods for current consumption, it
merely brings future consumption forward. Debt incurred and spent today
is future consumption denied.

So the Fed policy of loose money comes around at this point to destroy demand from consumers. While TARP may have been necessary at one point, clearly it is not helping now except to kick the can down the road through once again trying to increase debt in all sectors: individual, corporate and government. That seems to be the only economic tool policy makers will use.

Simply put, ultra-low interest rates mean that those who have saved
money in whatever form will be getting less return on that money from
safe, fixed-income investments. We're talking about rather large sums of
money, as we will see. Ironically, this translates into a loss of
consumption power when the Federal Reserve is supposedly concerned about
consumption and requires increased savings at a time when the Fed is
trying to boost demand. This is robbing Peter to favor an already
well-off Paul.

Hope readers got the distinction between fiscal and monetary policy and why it is so important to understand the differences. If we only use monetary policy the result will be the loss of consumption and less demand. The only ones who win are financial institutions and already wealthy individuals. The rest lose because they are getting less return on safe fixed-income investments and inflation and the resultant decreased purchasing power hurts demand and makes most people poorer. And, the large sums of money Maudlin talks about - Pension Plans! Got one? Be concerned.

The other distinction is Nation and State. And, why this is important became clear today when trying to understand why governments will not reign in deficit spending for one thing. The concept can be applied to many other government policies that do nothing for the common person except make their lives worse. Over at Golem XIV in an article by David Malone he helps us understand the difference between Nation and State.

Our problem and their advantage is that it is deeply ingrained in us to
see the State and the Nation as almost interchangeable. The very name,
‘The Nation State’ inclines us to believe that the State and Nation are
one and therefore that any action taken by the State, no matter how
harsh or unfair it might seem to us, must necessarily be for our good.
It allows those who control the State to hide their narrow selfish
interests behind a smokescreen of talk about the Nation.

David uses the example of the EU-US Trade talks portrayed in the media as a battle ground for governments to advance the interests of their citizenry. Who does it really help?

They, with the help of a largely supine and grovelling media, will claim
to be there for you. They will be decked out in flags and called by
the names of our nations or national groupings, such as the EU. But the
truth will be otherwise. Behind the national name plate a largely unseen
machinery will be almost entirely corporate. Both sides will be there
to seek advantage, not for you the people, not for the nations whose
flags they use as camouflage , but for the corporations who pay them.
The US delegation will seek advantage for US based global corporations
and the EU delegation will seek advantage for EU based global
corporations. Both sides will be hailed victorious. The real question –
very carefully never ever raised by the compliant media will be - who
lost? And the answer, studiously unreported, will be the ordinary people
of both sides.

Then he argues who does the NSA (US) and GCHQ (British) really work for? Is it The Nation as we are led to believe? Using Snowden's disclosures as an example.

But is it really National Security Mr Snowden compromised or State
Security? When someone appeals to ‘National Security’ the unspoken
assumption is that they are talking about your security and mine. We,
after all, are ‘the Nation’. But I wonder if Mr Snowden might be more
accurately described as having compromised the State’s security rather
than the Nation’s. Which doesn’t sound nearly as good, does it? State
security has a ring of the Stasi about it. And for good reason.
Protecting the interests and security of the State is quite different
from protecting the interests of the people who make up the Nation. One
is about protecting you and me. The other is more about protecting the
position, power and wealth of those who make up the State and its
various organs of power. State security is about the security of the
jobs and social postion of those who are ‘the State’. It is about the
security of a particuar arrangement of power and those who benefit from
that arrangement. Which one does the NSA or GCHQ serve? Which did Mr
Snowden really compromise by revealing the extent of the NSA’s and
GCHQ’s indiscriminate and unlawful spying upon ordinary and innocent
citizens?

Mr Malone challenges us to prove that the persecution of Snowden really helps the Nation. Our elected representatives are almost completely divorced from the internal running of the NSA and GCHQ. So, who do the NSA and GCHQ work for?

If we wish to hold on to the fiction that the NSA and GCHQ work for
their respective Nations then how do we explain that the people we
elect, even very senior members of the State, even within the government
of the day, had NO idea what the NSA or GCHQ were doing? Certainly the
NSA and GCHQ were financed by us, and draw their original legitimacy
from us, but they no longer answer to those who we elect. So who do they
answer to? To what are they loyal and to whom do they report?

And, here is why I have been thinking, writing, and communicating that the divisions between Pubs and Dems, liberals and conservatives, and Left vs Right are all artificial divisions to keep the voting public angry at the wrong supposed enemy and completely in the dark about the reality of the situation. This situation has been clear to me for sometime. I really like the way Mr Malone lays it out in the next section.

The old order was laid out from left to right: Communist to
Libertarian. From those who felt the State was there to guarantee
certain protections and provide a minimum of welfare and service, over
to those who felt any intervention from the State was no more than an
abuse of power by a group of self serving insiders. Largely this is
still the range of thought and opinion. Those on the Left see the Free
Market as the greatest danger to liberty, welfare, justice and fairness,
and regard the State as our best protection against it. While on the
Right the fears are exactly the same but the State is now the great
danger and the market the best protection. Each side regards the other
as hopelessly, even criminally, misguided. Each side sees the other
advocating that which will bring disaster.

Into this sterile and suffocating tweedledumness a new ideology and
power has grown. It is neither Libertarian nor Left, but has been called
both. The Libertarians have seen how eagerly and constantly this new
politics intervenes in and distorts the market and cries
“Socialism”. Which, it has to be said, makes anyone who knows anything
about Socialism gasp with amazement. Nevertheless you can read this
‘it’s socialism’ opinion in most of the right wing press and on most
blogs where Libertarians comment, such as ZeroHedge or The Ticker.

On the other hand the Left sees the way the new politics intervenes
on behalf of and protects the interests of the wealthy (The financial
class and global corporations) doing nothing about tax avoidance,
nothing to regulate the banks, insisting instead that the only answer is
more free market, less regulation and austerity to be borne by those
least able to bear it – and sees clear evidence that this new politics
is right wing and libertarian.

Both sides seems only able to see things in terms of the labels and
world view they are used to and as a consequence see nearly nothing at
all. The truth, I suggest, is that we are at a moment when an entire
cultural form is ending. At such times it is not one part or another,
government or market, which corrupts and breaks, which betrays the
values it was meant to embody and ceases to do the job for which it was
created, it is all parts at once. All parts of our society have become
corrupted.

We must move beyond the politics of the last century, seeking to
blame all ills on a corrupt and captured State or alternatively on a
corrupt, captured and rigged market. BOTH are true. Both are corrupt.
Neither is working for us. A new elite exists in every nation, has
control over every State but which has no loyalty to the Nation of
people in which it exists any more than a tape worm is loyal to the
creature in whose body it feeds and grows.

Nation vs State and Fiscal vs Monetary Policy. Understand how these distinctly different concepts are affecting us in very real ways. The general media, political and economic pundits, and politicians confuse the differences and keep us mad at artificial divisions like Pub/Dem, Left/Right, Conservative/Liberal instead of the real culprits who create and continue the problems the average person face.

Monday, November 4, 2013

This past weekend while bicycle riding along in what most people would call a very aggressive paceline at around 28 mph two guys right in front of me got tangled up and crashed. It looked like one of those peloton crashes you would see in a pro bicycle race when bikes go flying into the air, people are sliding across the road, and then there is the sickening silence of someone not moving. And, as soon as people know that everyone is going to live the blame game starts. Why?

We had just left a regroup point at a local gas station, market and bathroom. There were three tandems and a group of about six riders on regular bikes who were pushing the pace. First everything is nice at around 21 mph and people are relaxed. Then it gets a bit more serous at 23 mph. The third tandem in line threw a chain and had to stop. That turned out to be the precursor of the crash - or was it really?

A gap opened up and the group behind the third tandem now had about 50 yards to close. The front six bikes and two tandems were really moving. It was taking a major effort of around 28 mph to see the gap start to close. I was on the front for a minute and then maxed out. A couple guys go by and then a few more. I bridge to them for about a minute and then realize it ain't happening for me so I start to back off. My unwillingness to go anaerobic for a longer time turns out fortuitous because a 15 foot gap to the small chase group in front of me has opened providing precious time for what comes next.

Then I hear that horrible sound of bikes on pavement, people yelling, and see the mayhem a half second away. While slamming my brakes on and skidding through the off-pavement gravel in-between the two guys and bikes on the ground with both wheels locked up the strangest thing happens. My right elbow seems to twitch ever so slightly and I get this message it does not want to be scraped up. Very weird.....

That forgotten, I slide to a stop and survey around me. One guy is laying on his back holding his wrist and people are asking if he is OK. It is obvious he is not and he has already immobilized himself. He is talking about what happened and that people were in that pace line that should not have been and answering questions about his well-being. One guy who acts like a medical professional is attending to him and asking him not to move until a better assessment can be made of his condition.

The other guy is walking around a bit dazed with blood coming out of his chin and elbow. All of sudden there is a loud bang. His front tire had rolled off the rim and the tube blows while we stand around trying to figure out what happened. That is when the blame game starts.
And, I am just as guilty as anyone saying something or silently thinking it. It seems obvious that someone was sort of maxed out physically trying to keep the acceleration. A little thing at 21 mph that would have been adjusted for and no one would have given a second thought to, now conspires at 28 mph to cause an accident because reaction times were slowed just that wee fraction of a second due to exhaustion and a faster speed necessitating even faster reactions.

If only the lead folks had not surged. Why did everyone have to push it just a couple miles out of the rest stop? Why didn't the lead group slow down? How come people obviously over their head did not pull out of the chase group? On and on and on.........

Only a few hours later when replaying the whole scene again did I realize my own compulsion to affix blame. And, it made me sad to think maybe someone accepted blame and then was feeling guilty. One guy ended up with scrapes and bruises. The other guy has a separated shoulder and a fractured wrist and supposedly will need surgery on the wrist. So, everyone lived but one has semi-serious injuries that he might bounce back from in a few months or could be dealing with for a longer time. Everyone on this big club ride of around 45 people was at least in their 30's with the majority in the 50 - 60 range. The guy that broke his wrist was probably in his late 50's around my age and I felt badly for him and part of me wanted to find someone to blame, like that would help him. Now I feel so stupid.

Is there a correct way to deal with these kinds of events? Do we accept it as fate? Should we figure out who to blame and then either educate them or ostracize them from club rides? Is it OK to just accept it happened and not think about it anymore? Why did my elbow talk to me while both brakes are locked up and I am thinking I am going to crash? Do we handle the next club ride differently by maybe setting up three groups to ride at different paces? Why are we taking bike riding so seriously?

Bike riding is supposed to be fun and this makes you question that. In the end, while eating my Italian dinner and enjoying the endorphin high of a 88 mile ride I felt guilty for not feeling guilty. What kind of mind game am I playing with myself? I don't have any answers right now.